EXCLUSIVE | Karnataka Excise Policy: ‘Tax Should Focus on Alcohol Content, Not Price Control’ says JK Arora

The Karnataka government’s proposed shift to alcohol-content based taxation could improve pricing flexibility and industry growth, according to JK Aurora of Som Distilleries and Breweries.Under the proposed system, companies would have greater flexibility to position their products within different tax slabs depending on alcohol content and pricing strategy

The Karnataka government’s proposed move to shift its excise regime to an alcohol-content based taxation system could significantly impact India’s liquor industry. Currently, taxation is largely based on the total volume of alcoholic beverages, but the new policy aims to tax products according to their actual alcohol content.

Speaking in an interview, JK Arora, Chairman of Som Distilleries and Breweries, said the proposed reform represents a positive development for manufacturers and consumers. According to Aurora, the industry has long been advocating for a taxation framework that focuses on alcohol strength rather than total volume.

Industry says policy could improve pricing flexibility

Arora said the current pricing mechanism in many states involves strict controls on product prices along with fixed taxation slabs. He noted that manufacturers have often urged governments to focus on taxation levels rather than controlling the selling price of products.

Under the proposed system, companies would have greater flexibility to position their products within different tax slabs depending on alcohol content and pricing strategy. Aurora described the move as a “significant step” as it could reduce rigid price controls that have traditionally affected liquor manufacturers.

He also highlighted that certain categories, such as ready-to-drink beverages, typically contain only 4–5 per cent alcohol, with the rest consisting of water, fruit juice or other ingredients. Despite this lower alcohol content, such beverages were earlier taxed similarly to stronger spirits. The proposed policy could change this structure.

Possibility of other states following the model

Arora suggested that the policy shift in Karnataka may encourage other states to reconsider their own excise systems. He pointed out that Karnataka has been one of the leading states in terms of excise revenue generation, with collections estimated at around Rs 40,000 crore and targets expected to reach about Rs 45,000 crore in the upcoming financial year.

He added that states such as Uttar Pradesh have also been implementing reforms to improve transparency and efficiency in excise policies. If the Karnataka model proves successful, other states may adopt similar tax structures.

Potential impact on som distilleries and breweries

Aurora said the new taxation framework could positively affect the company’s financial performance. Earlier policies had imposed similar tax burdens across products regardless of price differences, which limited flexibility for manufacturers.

The proposed system, which reduces the number of tax slabs and allows companies to position products according to pricing levels, could provide additional room for growth. According to Aurora, Karnataka contributes a significant share of the company’s business.

He said the company’s revenue share from the state had increased from about 3 per cent to 21 per cent earlier, though policy changes last year temporarily reduced it to around 10 per cent. The share has since recovered to approximately 12 per cent, with expectations of further improvement.

What the policy could mean for the industry

If implemented effectively, alcohol-content based taxation could reshape pricing and product strategies across India’s liquor market. Industry executives say such policies may encourage innovation in low-alcohol beverages and ready-to-drink segments.

At the same time, the policy could help governments maintain or increase revenue collections while offering a more balanced taxation structure. Analysts note that the success of the new system in Karnataka may determine whether other states adopt similar excise frameworks in the future.